Global markets were up post-Christmas and even though the US major indexes ended Friday’s trading down they were up for the week having made new highs. The S&P pushed up to the 1845 and closed the day at 1845. On the hourlies, so far the index has carved out three waves and appears to be starting its fourth minuette wave now. The move up from Dec 18th 1767 low is thin with shallow retracements and could either be finished now or pushing up to higher levels before it’s finished its impulsive move to complete fifth waves at minute degree. Minimum targets have not been met and I am looking for the index to make a couple of more pushes up to about the 1870 where the minute fifth hits equality with wave one to complete primary B wave. On the bigger fractals the index is past due for a good size pull back and maybe even a prolonged five wave move down which could chop more the 50% off stocks. The Dow Industrials, NASDAQ, and Transportation are also in the very same situation about to finish fifth waves which complete corrective moves at primary degree. Sentiment indicators are at extreme highs with equities leveraged at records. Market analysts are confident The U.S. economy is “very strong” everywhere you look. Bloomberg prints that “U.S. stock-index futures were little changed after the Standard % Poor’s 500 Index closed at a record amid optimism over the economic recovery.” According to the Elliott Wave method, these are signs you see at market tops.
Bear in mind that the Fed took out the Fed Fund rate unemployment limit of 6.5% and left it open. This tell me that so far the economy can not handle higher rates. However, markets seem to be pricing in a Fed cut for the short end of the Yield curve is inching up on the back of the good fundamental numbers of late. The US 10 Year Yield closed above 3 at 3.01% and could head up to the 3.24 in no time. Markets optimism is betting on the idea that rates are rising because the economy is strong. However, it is yet to be seen if the U.S. economy can handle the higher rates being that both the Stock Market and Housing are very interest rate sensitive at present.
The U.S. 10 Year Yield can be counted in three ways. My primary count has the Yield in a B of a fourth wave flat at minute degree which started at the Sept 13th 2.98 third wave high. So far the move up from the Oct 24th A wave completion is choppy and could turn around at any time now for a C wave down just past the 2.47. However, Flat B waves can move up 138.2% past the start of their A waves. This gives Yields room to move up to the 3.16, which is likely since it has moved up past the 3.0% already. A move past this would invalidate this scenario for my secondary count which would make the move up from the 2.47 low a fifth minuette wave with targets at 3.20 for a five wave move completing wave 1 at minute degree. If the 10 year moves up past this level without retracing in wave two fashion, then the third and most dangerous count would take precedent putting the Yield in a 3rd wave at minute degree with targets at 5.12 the 161.8% 3 vs. 1. Regardless of which scenario you chose for the moment yields are heading up. Whether this supposed recovery can handle this is unlikely to me. I believe it won’t take more than a month to find out.
The US Dollar Index fell off this week and made a new low 79.86 below the Dec 11th 79.75 low in a rare triple zigzag. This move surprised many, being that both fundamentals and Technicals were favoring a strong Dollar move up. However, The buck wasted no time retracing most of the move down and closed at 80.33 just above the end of the A wave down of the last Z zigzag. A move down past 88.7% retracement at 79.27 would put the immediate bullish count in question. However, being that the move down from the Nov 8th 81.48 high is very corrective and that it has counted a triple zigzag, the chances are high that the Buck will move up from here.
Gold and Silver have both held up pretty well considering the Fed taper and rise in interest rates. However, as I have mentioned before, sentiment has been way down on the metals. The talk of late is reminiscing of the 2000. On the charts, both metals are in 4th wave retracements and need to move down in minuette fifth waves to complete third waves at minute degree. From there the metals should move up in deeper retracements. Gold moved up from the Dec 19th in what appears so far a zigzag while silver has been moving sideways from its 18.89 Dec 4th low in what looks like a triangle fourth wave yet to complete. Notice the divergence between copper and the precious metals. The optimism in stock has to be driving copper higher while gold and silver are making new lows. According to Debbie Carlson of Kitco News, Walter Zimmerman Jr., chief technical analyst was quoted as saying that the last time the split between gold and copper had been this large was in 2000 before the tech bubble burst and sent copper down and gold up. Could this be a sign the markets are about to turn?
It is very hard to pick market turning tops. But one can not deny the fact that we are close now to a major downturn of epic proportions. Just about every analyst would agree that the markets should be turning in a bad way. Their optimism comes from their mislead conviction the the Fed this time has trumped the market.